NPOs Flashcards
What are 4 principal sections of statement of activities?
1- Revenues and gains
2- Net assets released from Restrictions
3- Expenses and Losses
4- Change in Net Assets ( including reconciliation of beginning and ending net assets).
How many financial statements are required for all NPOs?
1- Statement of Financial Position
2- Statement of Activity
3- Statement of Cash Flows
VHWOs are also required to present:
Statement of a Functional Expenses
What are two classifications of reporting expenses?
1- programming Services – expenditures made to further the main mission of the organization.
2- Supporting Services – expenditures made to provide organizational infrastructure and to raise resources. Supporting services are always reported on two lines.
1- Management and General
2- Fund raising
What expenses are included in support services for NPOs?
Management, gen. admin, fund raising, and membership development expenses.
What are inexhaustible assets?
Works of art, cultural treasures, historical documents and property, etc.
They are not capitalized and they don’t appear on the face of the financial statements. They are disclosed in the notes and there’s no depreciation to be recorded.
In order for an asset to be inexhaustible and be known as “collectible “ or “collection “ it must have these 3 conditions.
1- held for public exhibition, education, or research rather than financial gain.
2- protected, kept un encumbered, cared for , and preserved;
3- subject to a policy that requires proceeds from sales of collection items to be used to acquire other items for collection.
How is investment reporting handled by NPOs?
Must report all marketable securities at their fair value. Changes in market value are recognized on the statement of activities as unrealized gains and losses during the period of the change.
Debt securities are not reported as, Trading, Available for sale, and held to maturity categories. Here debt securities are always valued at fair value.
When are pledges recognized?
In the period when they are made not when cash is collected.
However conditional pledges are recognized only when the condition is net or immediately if there’s remote chance that the condition will not be met.
What an entry looks like for an unconditional pledge where 30% of pledge might not be collected?
Pledges Receivable 1,000
Un collectible Pledges. 300
Contribution Revenue. 700
Rules for pledges made over Multiple Fiscal Periods.
1- recognize revenue at the net PV of the contribution.
2- the portion of the pledge that is to be received in subsequent fiscal periods is considered “temporarily restricted” (time restricted); the portion that is to be received in the current period is recognized as “Unrestricted” assuming there’s no other restriction.
3- the net PV of the pledge is recalculated at the end of the period (or whenever the FS are prepared) and increases in bet PV are booked as “contribution revenue” not “interest revenue”.
4- when the future payments are received the assets are reclassified as unrestricted net assets, assuming that there are no other restrictions, on how the money may be spent, but Revenue is not recognized, because it was recognized when the pledge was made.
What conditions must be met for recognizing donated services?
1- non-financial assets are enhanced
OR
2- services requiring a) special skills are provided b) by persons possessing those skills and the services would c) normally gave been purchased by the organization.
Entry for donated services
If non-financial asset is enhanced:
Building. 100,000
Contribution Rev. 100,000
This was the case when an architect donated his service to design a building, a non-financial asset.
Special Skill type donated services:
Audit expense 5,000
Contribution Rev. 5,000
This is the case when a CPA donated auditing services.
Name the 3 types of restrictions which exist under the temporarily restricted category of funds.
Specified (operating) purposes: these are known as “program restrictions”
Capital purposes: these are known as “asset acquisition” or “capital restrictions”
And “time restrictions”
Permanently restricted are known as Endiwmwnts
